We charge a factoring fee for expenses related to our credit and collections services. Our factoring rates are between 1.5% and 5.0% of the invoice amount, depending on your sales volume, number of invoices and your customers’ credit. We determine the rate during the account approval process.
We charge a finance fee in the form of interest on the outstanding invoice amount. Our interest rate is one percent per month. If the invoice is collected in 30 days, then the interest charge is 1% of the invoice amount.
We withhold a reserve between 15% and 20% from your cash advance. The reserve is returned to you upon the collection of your receivables. The reserve is a protection measure against bad debts and losses. If a loss occurs, we deduct the amount from your reserve. As we receive collections, your reserve is funded back to you.
Our factoring service contract is very flexible. We only require a 30 day written cancellation notice to close your account.
You will discover that many factoring companies quote you an extremely “low rate”. However, their contracts contain escalating fees on a monthly or periodic basis. For example, their initial 2% fee only applies to the first 20 days of an outstanding invoice. After 20 days, the fee increases an additional 1% for every 10 days outstanding. Therefore, an invoice that is outstanding 50 days really costs 5%, not the quoted 2% rate. Mazon has very clear and simple rate structures; we don’t hide our fees.
Many factoring companies neglect their collection of invoices, because they receive fees based on the outstanding days of the invoices. However, Mazon is very diligent with our collections. We have a 32 average days outstanding. The factoring industry has a 50 average days outstanding. Mazon doesn’t make a practice of making money on slow collection efforts.
Some factoring companies don’t provide collection services. You will perform all the collection and credit functions. You incur significant overhead costs related to your accounts receivable. Rather than focusing on your business operations, you are diverting energy and resources to accounts receivable.
Long –Term Contracts
Many factoring companies require a 6 or 12 month contract that is automatically renewed. If you decide to terminate your contract early, you may get charged a large cancellation fee.